Just my two cents for whatever that may be worth (possibly nothing).

If you scroll back to our discussions during the last correction (end of February) you will see that I was quite right in that it was a non-event...it simply didn't have the tell-tale signs of a real correction- ie. fear.

This one is quite different. As I posted about a week and a half ago, the market is/was scaring me. The biggest problem is that the majority of market participants don't understand really what the media is calling "a credit crunch/ repricing of risk". So when the mkt began to fail, it snow-balled as more and more people began to think that the world was coming to an end. They figured that the problem must be huge and the media helped to perpetuate that thought. Nothing worse than the fear of the unknown.

Now I'm not about to sit here and down-play the issues at hand. For some, like the less than .5% of the American population losing their homes, the banks and other loan outfits caught holding the bill, this event is quite significant. But and it's a huge BUT, the Central Banks have stepped up world-wide by throwing the most liquidity I have ever witnessed into the system. Sure the odd small leveraged lender and Hedge Fund specializing in this area is going to be broken and kicked on to the curb, but with the amount of money injected into the system, THERE IS ABSOLUTELY NO WAY WE ARE GOING TO SEE A MAJOR BANK FAIL HERE. Smart money figured this out late in the week, and that is why we saw them lead the recovery Thursday afternoon and Friday.

So why didn't Gold immediately pop as currency was added at a feverish pitch? That's the question many have been asking. My opinion is that Gold is cash in that it's liquid- and that's the fundamental reason we all play it right? I mean most banks and gov'ts hold it as a substitute for paper money. They don't have warehouses full of copper, nickel, lead, zinc or oil, they have Gold.

My belief is the US Gov't and a lot of American Banks sold Gold to raise cash this week to maintain their liquidity. All of the turmoil we are speaking about originated in the Sub-prime mkt in the States. So how else can one explain the rise in the US dollar up until Friday mornings Discout rate cut? The cdn dollar dropped to about 92cents at one point indicating to me anyway that Gold was being sold and US dollars bought. Who in their right mind could be behind such transactions except the Americians themselves...I mean was anyone here thinking now was the time to buy the US green-back??? If the US economy is on the verge of a recession or a major slowdown as we're being told, than interest rates have to come down right? When interest rates come down, the currency of that country goes down as it becomes a less attractive investment vehicle- that's a fact. So imo there is no other explanation for the US dollars rise than what I've presented above. Sure enough, as soon as the Discount rate was deflated by a half a point on Friday, yields dropped, the US dollar tanked, and Gold popped.

I believe that the US institutions have limited Gold to part with and even less that they would be willing to sell here. They wanted liquidity last week and that's what they used to raise it. So I'm treating the Gold sell-off as a very short lived event that imo will be followed by a dramatic spike. I should say this though, although I'm a gold bug you will not ever see posts from me calling for $2000 gold or anything close to it. I do believe we could see the metal in the $800 range over the next 12 months. When I model gold explorers I use $600 gold.

Lastly, keep in mind that gold stocks go down initially in mkt sell-offs the majority of the time. "Throw the baby out with the bath water". But when the rebound comes that's when they shine. Lets see where they sit in three to six months and measure them up against the index's in terms of performance. It's going to be a bumpy ride, but then again us ARU shareholders have been conditioned for that

Kind regards,
Buck